Differences between domestic accounting standards and IAS: measurement, determinants and implications

This study analyzes determinants and effects of differences between Domestic Accounting Standards (DSA) and Internationake Accounting Standards (IAS).International accounting differences; institutional factors; earnings managements; synchronicity

Economic Consequences of Auditing Standards: Evidence from Auditing Standard No. 18 Related Parties

In 2014, the PCAOB adopted a new auditing standard - AS 18 Related Parties - to improve auditors’ performance in related-party transaction (RPT) auditing. In this study, we investigate the impact of AS 18 on firms’ real RPT activities and audit fees by examining six years’ data surrounding the effective date of AS 18. Using a matched-pair difference-in-differences approach, we find significantly reduced RPT activities and increased audit fees following the adoption of AS 18. Our findings reveal that AS 18 has a greater impact on small client firms, particularly firms audited by non-Big-4 firms. In contrast, the Big-4 firms had already taken measures to improve their RPT audit procedures. We also find a more pronounced effect for firms with high ex-ante fraud risk

China's anti‐corruption campaign and financial reporting quality

We examine the impact of China's anti‐corruption campaign on firm‐level financial reporting quality (FRQ). As an important component of the anti‐corruption campaign, in October 2013, “Rule 18” was issued to prohibit party and government officials from serving as directors for publicly listed firms. The regulation led to a large number of official directors resigning from their roles as directors involuntarily. As such, Rule 18 has effectively weakened, if not fully discontinued, the political connections of the firms that previously hired officials as directors. Our empirical analyses employ a difference‐in‐differences research design with firm fixed effects and propensity‐score matching to examine the pre‐ and post‐period FRQ around the enactment of Rule 18. We find that, compared to propensity‐score‐matched control firms, FRQ of firms with resigned official directors increases after Rule 18. Further evidence suggests that the impact is stronger when firms are located in regions with more developed financial markets and in regions with higher judiciary efficiency. We also find that the effect is more pronounced when firms are non‐state‐owned, received preferential credits, and face refinancing pressure

Protecting the Giant Pandas: Newspaper Censorship of Negative News

We investigate newspaper censorship of firm-level negative news using a rare setting in which many companies were involved in similar tunneling scandals. We find that the Chinese censorship authorities restrict the dissemination of tunneling news on state-owned enterprises, firms with greater numbers of employees, and large taxpayers. An examination of the difference in censorship behaviors between the central and provincial authorities reveal three incentives that direct the censorship practices: strong local protectionism, cross-provincial competition, and the concern for the relative positions in the political power system. Finally, we show that the tunneling news that is reported leads to negative market reactions and greater trading volumes, indicating that the news that survives the censorship has information content

Happy Analysts

This paper is the first to investigate the role of work-life balance in financial analysts’ performance and career advancement. Using a large sample of Glassdoor reviews by financial analysts, we find a significant non-linear relation between broker-level work-life balance satisfaction and analyst performance and analyst career advancement. Specifically, when work-life balance satisfaction is relatively low, an increase in work-life balance is associated with better analyst performance and career advancement; however, when perceived work-life balance is already high, a further increase in work-life balance is associated with worse analyst performance and career advancement. We make further use of detailed LinkedIn data and measure work-life balance at the broker-office-level and find consistent results

Happy analysts

Also presented at 29th Annual Conference on Financial Economics and Accounting 2018, November 16-17, New Orleans, LA</p

Empirical evidence on jurisdictions that adopt IFRS

Wharton-SMU Research Centr

Do politically connected directors affect accounting quality? Evidence from China's anti-corruption campaign (Rule 18)

Published in Contemporary Accounting Research, 2020, DOI: 10.1111/1911-3846.12557. Full text available at https://ink.library.smu.edu.sg/soa_research/1889</p

The pricing of conservative accounting and the measurement of conservatism at the firm-year level

This paper analyzes the relation between equity prices and conditional conservatism and introduces a new measure of conservatism at the firm-year level. We show that the asymmetric properties of conservative accounting, the existence of non-accounting sources of information, and the properties of GAAP related to special items combine to generate a nonlinear relation between unexpected equity returns and earnings news (the shock to expected current and future earnings). Based on this model, we construct a conservatism ratio (CR) defined as the ratio of the current earnings shock to earnings news. CR measures the proportion of the total shock to expected current and future earnings recognized in current year earnings. Ranking firms according to CR, we show empirically that higher CR firms have more leverage, increased volatility of returns, more incidence of losses, more negative accruals, and increased volatility of earnings and accruals, consistent with the literature on conservative accounting